Subsidy fraud in the spotlight

For almost a century, the rules governing subsidy fraud lay hidden in an obscure and unappealing Royal Decree that, in practice, largely escaped notice. That is now changing. Since 1 September 2026, the offence has taken a more prominent place in the new Criminal Code ("CC"), while Flanders is going a step further by introducing its own administrative sanctions. The message is clear: those who tamper with subsidies will not get off lightly.

Integration into the Criminal Code

Retention of the subsidy offence in federal legislation (Article 691 CC)

Until 31 August 2026, subsidy fraud was governed by the Royal Decree of 31 May 1933 on declarations to be made in connection with subsidies, allowances and grants (the “Royal Decree of 31 May 1933”).

Upon the entry into force of the new Criminal Code on 1 September 2026, this offence moved and was given its own provision in the Criminal Code. Article 691 of the Criminal Code reproduces the rules set out in the Royal Decree of 31 May 1933, which is repealed simultaneously with the entry into force of the new Criminal Code. The provision criminalises three intentional forms of conduct:

• making an inaccurate or incomplete declaration in an application to obtain or retain a subsidy;

• failing to notify the relevant services that one is no longer entitled to a subsidy or is entitled only to part of the amount, and accepting or retaining a subsidy or part of it while knowing that one has no or only a partial entitlement;

• using a subsidy for purposes other than those for which it was awarded.

The term “subsidy” is defined broadly. It covers any subsidy, compensation or grant borne wholly or partly by the State, a Community, a Region or another legal person under public law, or by an institution, body or agency of the European Union or by another international institution.

The offence is punishable by a level 3 penalty: for natural persons, a principal prison sentence of 3 to 5 years; for legal persons, a principal fine of between 360,000 euro and 600,000 euro. Where mitigating circumstances are accepted, the penalty is replaced by a level 1 or 2 penalty. Level 3 offences may normally also carry an additional fine of up to 10,000 euro, but subsidy fraud is subject to different maximum fines

Conduct Maximum fine (to be multiplied by 1.25 to reflect the statutory surcharge multipliers ("opdeciemen/décimes additionnels")) Inaccurate/incomplete declaration 400,000 euro (800,000 euro if the subsidy is actually received/retained) Failure to notify 120,000 euro Improper use 600,000 euro

Case law and practical pitfalls

In essence, Article 691 of the Criminal Code is a direct copy-paste of the provisions of the Royal Decree of 31 May 1933. The criminal provision on subsidy fraud has (and has always had) a broad scope.

Recent case law – which remains relevant because the new Criminal Code adopts the rules set out in the Royal Decree of 31 May 1933 – also demonstrates how important it is to act carefully when applying for and obtaining a subsidy.

For example, temporarily transferring a subsidy to an investment account while awaiting the start of the project, even if this occurs within the period for which the subsidy was granted, constitutes a punishable diversion of the subsidy. Even if this is done for sound financial-management reasons, it may still result in a conviction and an obligation to repay. Entrepreneurs who obtain a subsidy for their business and later sell it should likewise ensure that appropriate safeguards and protective mechanisms are put in place. If the subsidy is included in full in the sale price and the buyer subsequently misuses it, the seller may be held criminally liable. The same applies where a buyer acquires a business and receives a subsidy on the basis of earlier false declarations. Even if the buyer is acquitted, the subsidy may still be withdrawn, which can in turn give rise to disputes in connection with the sale. These examples show how quickly and often unwittingly one can become embroiled in a subsidy quagmire.

Flemish variant and administrative enforcement

Because of Flemish concerns that subsidy-fraud cases are not a criminal priority for the Public Prosecutor’s Office and are therefore rarely prosecuted, a preliminary draft amendment decree is pending that would further tighten the rules on subsidy fraud in Flanders.

Introduction of a Flemish subsidy offence (new Article 104/3 KVH)

The preliminary draft decree would introduce a separate Flemish subsidy offence into the Flemish Enforcement Framework Decree of 14 July 2023 (the “KVH”) (Article 104/3). In doing so, Flanders adopts both the description of the offence and the penalty scale from the federal subsidy offence (under Article 691 CC). The Flemish variant is intended to enable the Flemish enforcement authority to impose an alternative administrative sanction where the Public Prosecutor’s Office decides not to prosecute (dismissal) or remains inactive. Flanders can provide for an alternative administrative sanction only in respect of conduct that the federated entity itself has designated as an offence.

The fining authorities may initiate administrative prosecution only if the Public Prosecutor’s Office decides not to prosecute (dismissal) or fails to respond within three months (which period may be extended to a maximum of one year) (Article 38 KVH).

The alternative administrative fines are:

Legal persons Natural persons Minimum 250 euro 250 euro Maximum 750,000 euro 500,000 euro

Ancillary sanctions are also possible: administrative confiscation (including of the gross pecuniary benefit) and exclusion from support for up to five years.

Integrity condition for the granting of subsidies

The preliminary draft amendment decree would also introduce an integrity condition aimed at preventing Flemish subsidies from being awarded to persons or organisations involved in, providing support for, or calling for violent radicalisation, extremism or terrorism. The check would be carried out through two channels:

• Ex ante by the Inspectorate of Finance: for each subsidy application requiring an opinion, the Inspectorate of Finance conducts a hit/no-hit check with OCAD/OCAM (Coordination Unit for Threat Analysis) and the federal police to determine whether the applicant is known in connection with violent extremism, radicalisation or terrorism.

• Ex post: during audit procedures, the same check is carried out in relation to subsidies that have already been awarded.

If the check produces a hit, the competent service must conduct an integrity investigation. Further subsidy payments are suspended for the duration of that investigation, up to a maximum of 50 working days. If misuse is established, amounts already paid are recovered. The Flemish Government ultimately decides on the refusal, suspension, revocation or recovery of the subsidy.

Conclusion

At the time of writing, the preliminary draft amendment decree is still going through the advisory phase at the SERV (Social and Economic Council of Flanders). The direction is nevertheless clear: at federal level, subsidy fraud is becoming more prominent, while Flanders is adding an administrative alternative that ensures a sanction may still follow where the Public Prosecutor’s Office decides not to prosecute (dismissal). Those who engage in subsidy fraud may therefore face significant financial consequences.

Authors:

• Tom Bauwens, Partner at Eubelius
• Katrijn Veeckmans, Advocaat at Eubelius